(Compiled by Pan Peipei from MyHotelNews, based on data from JLL’s recent Global Hotel Investment Outlook report): In 2013, total hotel transaction volume in Europe, the Middle East, and Africa (EMEA) rose 17% to USD 13.2 billion. In 2014, this region is expected to see a 20% increase, with total hotel transactions reaching USD 16 billion.
Although hotel markets in these regions are at different stages of recovery, their development potential is generally positive, and interest in hotel investments remains strong.
The investment environment has been supported by lenders and some private equity funds continuing to offload over-leveraged assets. JLL expects major global hotel brands to capitalize on the strong investment sentiment and continue pursuing asset-light strategies, leading to more hotel asset sales.
Additionally, Europe’s financing environment has improved, with some banks starting to lend to the hotel sector, and funding sources for the European hospitality industry becoming increasingly diverse.
Institutional investors are continuously seeking high-yield real estate investments and view hotels as part of a diversified real estate portfolio. It is expected that in the future, institutional investors will not only show increasing interest in direct investments but also allocate significant capital to the debt market. In 2014, core markets such as the UK, France, and Germany—due to their similarity and maturity—will offer better investment opportunities for investors.
Not only are European banks increasing lending to the hotel sector, but an increasing number of overseas banks are also stepping up lending to European hospitality, helping to improve the financing landscape. These include banks such as Bank of China, Singapore’s UOB, Royal Bank of Scotland, and several banks from the Middle East.
In 2014, more cross-border investments are expected, especially from U.S. private equity funds. As the U.S. domestic market becomes saturated, they are seeking more investment opportunities in key European markets. Asian investors are also keen to invest in the European hotel market, as compared to domestic markets in Asia, Europe’s real estate market offers more attractive medium-term growth prospects and more appealing investment returns. Over the past year, more Chinese investors have entered Europe, and due to China’s growing outbound tourism, this trend is expected to continue in 2014.
In 2013, the UK became the most liquid market, with total transaction volume reaching USD 4.7 billion—about 37% of global hotel investment transaction volume—driven by three major deals in the first quarter of 2013. Looking ahead, due to the positive market outlook in the UK, 2014 is expected to be even better than 2013, with RevPAR (revenue per available room) in London projected to rise by 4%.
Additionally, due to the sale and trading of premium assets such as the Louvre Group and Mandarin Oriental Paris, France became the second-largest country in EMEA in terms of investment transaction volume in 2013, accounting for about 18% of the region’s total investment transactions, with a total investment volume of approximately USD 2.3 billion. In 2014, no significant increase in transaction volume is expected in France.
Germany, benefiting continuously from strong market fundamentals, remains one of the most sought-after hotel markets for operators and investors in Europe. Although institutional investors still dominate, investment demand is expected to remain strong in 2014. In terms of European hotel transaction volume, Germany remains the third most liquid market in Europe.